* Performance Appraisal

Presented by
Setiono Winardi
http://www.linkedin.com/pub/setiono-winardi/22/7a/7a5

What is performance appraisal? Describe the uses
or benefits of performance appraisal.

Explain the various techniques of performance
appraisal.

Describe the limitations of performance appraisal.

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 Performance Appraisal
3

(1) According toEdwin Flippo, "Performance

Appraisal is the systematic, periodic and
impartial rating of an employee's excellence, in
matters pertaining to his present job and his
potential for a better job."

(2) According to Dale Beach, "Performance
Appraisal is the systematic evaluation of the
individual with regards to his or her performance
on the job and his potential for development."
 APPRAISAL PROCESS
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The Performance Appraisal process

involves the following steps :

(1)Establish the Standards of
Performance.

(2)Communicate these standards to
employees.

(3)Measure the actual performance.

(4)Compare actual performance with the
standards established.

(5)In case of variation, initiate corrective

action.

(6)Communicate the rating to the

employee.

(7)Discuss the feedback with the

employee.

(8)Conduct post-appraisal Interview.

(9)Initiate corrective action if required.

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 Purpose / Uses
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The main purposes of employee assessment

are as follows :

(1) Identify employees who are eligible for
salary increase.

(2) Generate data to take personnel
decisions such as promotion, transfer and
lay-off or termination decision.

(3) Determine the training and development
needs of the employees.

(4) Validate the selection process.

(5) To measure whether standards laid down has been
achieved by the employees or not.

(6) Estimate the future requirement of work force.

(7) Helps to recognise potential of promising employees.

(8) Last but not the least, performance appraisal also
helps in motivating employees by providing feed back
about their level of performance.

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 To evaluate
achievement of Human
established Resource
standards Planning

Training and Use of Validate

Development Performance selection
Appraisal. decision

Compensation Promotion/
decision placement
8 Decision
 Advantages of Performance Appraisal :
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(1) SWOT Analysis : Performance Appraisal gives

a complete idea of the employee's strength,
weaknesses and based on that their opportunities
and threats.

(2) Career Planning : On the basis of one's own
SWOT analysis, an employee can have his career
plans.

(3) Suitable Placement : Performance appraisal
enables a company to give suitable placement to an
employee based on their talents and skills.

(4) Self-Development : Performance Appraisal is
very much a positive activity which enables an
employee to know his own weaknesses and also
enables him to remove their weaknesses and lead to
self-development.

(5) Effective Training Programme : Training
programmes can be drawn out on the basis of the
needs of employees to remove their weaknesses.

(6) Sound Personnel Policies : Personnel policies for

promotions, transfer must be sound and objective.

Performance Appraisal provides valuable
information and reliable data for such decisions.
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(7) Employee Employer Relations will be healthy
if performance Appraisal information will be used
for personnel management. This will minimise
grievances and improve confidence in the
management.

(8) Higher Employee Productivity : Employer
morale will be high because there can be a system
of rewards for employees with higher performance.
This will improve organization productivity.

(9) Performance Appraisal will help in potential
human resource planning.

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 Limitations of Performance Appraisal :
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Personal Bias : The biggest limitation of
performance Appraisal is subjectivity. Due to
human element in Appraisal, there is always a
fear of one's own opinion coming in the way of
Appraisal.

(2) Halo Effect : The tendency of an individual to
rate an employee consistently high due to some
earlier good performance rather than his existing
performance is called as carrying a halo around
oneself.

(3) Horn Effect : The tendency of a superior to
rate a subordinate lower than his performance
justifies due to some recent/earlier failures.

(4) Lack of Uniform Standards : The standards used by
different departments in the organisation may not be the
same, hence, rating becomes unscientific and employees
suffer. Some rates are too liberal while others are too strict
causing lack of uniformity.

(5) Appropriate Appraisal Technique : Selection of

appropriate appraisal technique is important to give the
correct result. Some of the techniques are time-consuming
and costly and so avoided. If wrong techniques are applied
performance appraisal results may prove defective.

(6) Wrong Appraisal by Superior : Superiors have
continuous and daily relations with the subordinates, giving
accurate ratings may lead to spoiling relations with them
which the superiors may want to avoid, hence higher rating
to the subordinates.
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(7) Stress on Individual and not on Performance :
Performance Appraisal must lay stress on the
performance of the individual and not on his
individual and not on his personal characteristics.
Many a times this is overlooked and the personnel
characteristics comes in the way of his performance
appraisal.

(8) Central Tendency : Many a times to be on the
safer side the rater would put the ratee on average
scores. This happens because of 2 reasons first of
all if the rater does not want low scores to the ratee.
Secondly, if he himself is not competent and would
not like to show his incompetency.

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(9) Lack of Importance to Self-Development :
Performance Appraisal is not for witch hunting but for
finding out strengths as well as weaknesses. The strengths
can be consolidated upon and the weaknesses too be
removed through appropriate training. However, this
aspect is not given importance and so the main objective of
performance appraisal is neglected.

(10)Lack of Communication and Participation with

Employees : Performance appraisal is not complete
without communicating to the employee the results of the
appraisal and also give him a chance to give his opinion,
otherwise it is a one-sided affair without participation of
employee and will not lead to their development.
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(11) Time-Consuming and Huge
Paperwork : Performance appraisal is a
continuous job for the superiors. There is need
to continuously observe the subordinates, keep
records, fill documents, write reports, hence
time-consuming and costly.

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 Methods of Performance Appraisal
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(1) Ranking Method

(2) Paired Comparison
Method
(1) MBO

(3)Forced Distribution
(2) BARS

(4)Forced Choice Method
(3) Assessment Centres

(5) Check List Method

(4) 360o Appraisal

(6) Critical Incident Method

(7) Graphic Rating Scale
(5) Cost Accounting

(8) Essay Method
Method

(9) Field Review Method

(10) Confidential Report

(11) Person-to-Person Method

(1) Traditional Methods :

These methods lay more emphasis on rating of
individuals' personality traits, such as initiative,
dependability, drive, creativity, integrity, intelligence,
leadership potential, etc. In the following pages each
method has been described in brief.

(a) Ranking Method :

It is the oldest and simplest method of performance

appraisal. In this method the employee is ranked
from the highest to the lowest or from best to the
worst. Thus, if there are ten employees the Best
employee is given the first rank and the worst
18 employee in the group is given the tenth rank.
 However, this method has some
limitations namely :
(1) It is difficult to adopt this method,
in case of evaluating large number of
employees.
(2) It is difficult to compare one
individual with other having varying
behavioural traits.

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(b) Paired Comparison Method :

In this method, each employee is compared with the other on one-to-one basis.
This method makes judgement easier as compared to ranking method. The
number of times the employee is rated as better in comparisons with others
determines his or her final ranking. The total number of comparison can be
ascertained by the following formula :

where N stands for number of employees to be evaluated.

The concept can be illustrated with the help of the following example.

If the following five students Ashok (A), Bina (B), Chitra (C), Dinesh (D), Eillen (E)
have to be evaluated for the best student award, the total number of
comparison would be = 10

A with B

A with C B with C

A with D B with D C with D

A with E B with E C with E D with E

The number of times a student gets a better score, would be the basis for
selecting the Best Student. This method is not appropriate if a large number of
students are required to be evaluated.

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(c) Forced Distribution Method :

This technique was contributed by Joseph Tiffin. The
method operates under the assumption that an
employee's performance can be plotted in a bell-
shaped curve. Here 10% of the employees are given
excellent grade, 20% are given good grade, 40% are
given the average grade, next 20% are given the
below average grade and last 10% are given
unsatisfactory grade.

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 ber of employees
Numbe
}

}
}

}
}
Unsatisfactory
10% 20% 40% 20% 10%
Below average
Average
Good
Grades Excellent
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(d) Forced Choice Method :

This method was contributed by J.P. Guilford. Here, an evaluator
rates an employee on the basis of a group of statements. These
statements are a combination of positive and negative statements
and are arranged in blocks of two or more. The rater is required
to identify the most or least descriptive statement pertaining to an
employee. For example :

(1) Provides clear guidance to employees.

(2) Can be depended to complete the assignment on hand.

(3) Is reliable and trustworthy.

(4) Is partial to some employees

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(e) Check-list Method :

The main purpose of this method is to reduce the evaluator's
burden of rating the employee. In this method a dichotomous
questionnaire (A question with two answer choices namely `Yes' or
`No') is used. A rater is required to put a tick mark against the
respective column.

This questionnaire is prepared and scored by the HR department.
The main disadvantage of this method is the rater is not given the
flexibility to add or delete the statements. A typical check list is
given below :

Table 3 : Check list for Students

(1) Is the student regular

(2) Is he/she disciplined

(3) Does he/she complete the assignment on time

(4) Does he/she participate in extra-curricular activities

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(f) Critical Incident Method :

This method evaluates an employee on the basis of
certain `events' or `episodes' known as critical incident.
The underlying principle of this method is "there are
certain significant acts in each employee's behaviour and
performance, which can make all the difference between
success and failure on the job." Thus, in this method the
rater focusses his attention on all those factors, that can
make a difference between performing a job in a
noteworthy manner.

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Graphic or Linear Rating Scale :

This is the most commonly used method of evaluating an employee's
performance. Here the Questionnaire consists of more than 2 answer choices.
The Questionnaire consists of set of questions covering aspects such as:

(i) Employee Characteristics (includes factors such as initiative, leadership,
dependability, attitude, loyalty, creative ability, analytical ability etc.) (ii)
Employee Contribution (includes factors such as Quantity and Quality of
work, Specific goals achieved, regularity, attitude and approach towards
supervisors and colleagues, etc.)

The following table highlights a typical graphic rating scale:

(1) Quality of Work o o o o

Unsatisfactory Satisfactory Sometimes Consistently
SuperiorSuperior

(2) Dependability o o o o

Requires Requires Very little No
ConstantOccasional Supervision Supervision
Supervision follow-up

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(h) Essay Method :

In this method, the rater writes a narrative description of an
employees strengths, weaknesses, past performance, potential and
suggestions for improvement. As there is no prescribed format, the
length and content of essay is likely to vary. Similarly, the quality of
Essay would depend upon the rater's writing skills. As the essays are
descriptive in nature, it only provides qualitative information about
the employee.

(i) Field Review Method :

If during the appraisal process there are reasons to believe that the
employee is given a higher rating because of rater bias, a review
process is initiated. The review process is generally conducted by
the personnel officer of the HR department.

This method is also used for making promotional decisions at the
managerial level and when information is required from employees
of different units and location.
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(j) Confidential Report :

This is a traditional method of evaluating an
employee's performance. It is normally used in
Government departments and small business units.
Here, the evaluation is done by the immediate boss
or supervisor. The main limitation of this method is
the ratings are generally not discussed with the
ratee (only in case of adverse remark).

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 Modern Methods :
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(a) MBO (Management by Objective or Joint Target Setting)
:

This method was propounded by Alfred Sloans and
Donaldson Brown in 1920s. However, it was further
popularised by Peter Drucker in his book "The Practice of
Management" in 1954.

According to George S. Odiorne, MBO can be described as
"a process whereby the superior and the immediate
subordinate of an organisation jointly identify the common
goals, define each individual's major areas of responsibility
in terms of results expected of him and use these measures
as guides for operating the unit and assessing the
contribution of each of its members."

In this method emphasis is laid on stating objectives for
Key Result Areas (KRAs) in Quantifiable terms. For
example, in case of Research and Development
department, objective is stated in the following terms.
i.e. to design a new product by 31st March, 2005.

MBO is used as a performance appraisal technique, as it
is easy to measure whether the stated objectives have
been achieved or not.

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(b) BARS (Behaviourally Anchored Rating Scale) :

In order to overcome the problem of judgmental evaluation, this
method was conceived by some organisations. This method
combines the benefits of Essay Method, Critical Incident and
Rating scales.

In this method the employee's behaviour and performance
dimensions are analysed and used for evaluating the
performance of the employee. The HR department is involved in
the process of preparing the BARS. Based on the Employee's
performance and behaviour, employees are anchored in
different slots of good, average and poor. The rater is required
to give corresponding ratings to the employee.

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 (1) Has command over the subject.
Good
(2) Is abreast with latest information.
(9, 8, 7)
(3) Is dependable.

Average (1) Has subject knowledge.

BARS
(4, 5, 6) (2) Is not very up-to-date with latest happenings.
(3) Is not very dependable.

Poor (1) Has no subject knowledge.

(1, 2, 3) (2) Is not at all aware.
(3) Is not at all dependable.

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(c) Assessment Centres :

This method was used to appraise army officers in Germany
way back in 1930s. The concept was adapted from army to
business arena in 1960s. In India, the concept has been
adopted by organisations such as Crompton Greaves, Eicher,
Hindustan Lever and Modi Xerox recently.

This method is mainly used to evaluate executive and
supervisory potential. Here employees are taken to a place
away from work and a series of tests and exercises are
administered. For example, assesses are asked to
participate in; in-basket exercise, simulations, group exercise
and role plays. Performance of the employee is evaluated in
each of these tests and feedback is provided to the ratee, in
terms of strengths and weaknesses.

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(d) 360o Appraisal Method :

Where multiple raters are involved in evaluating
performance, the technique is called 360-degree appraisal.

The 360-degree technique is understood as systematic
collection of performance data on an individual or a, group
derived from a number of stakeholdersthe stakeholders
being the immediate, team members customers peers and
self.

In this method an employee's performance is evaluated by
his supervisor, subordinates, peers and customers (or an
outside expert).

All these appraisers provide information or feedback by
completing a questionnaire designed for this purpose.

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The 360-degree degree appraisal
provides a broader perspective about an
employees performance. In addition, the
technique facilitates greater self-
development of the employee. It enables
an employee to compare his evaluation
about self with perceptions of others.
Though this method was developed to bring
about a degree of objectivity, it still suffers
from subjectivity.

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(e) Cost Accounting Method :

This method evaluates an employee's performance in relation
to the contribution of an employee in monetary terms. Here
the rater evaluates the employee in terms of cost of
retaining the employee and the benefits the organisation
derives from him/her. The following factors are taken into
account in this method :

(1) Cost of training the employee.

(2) Quality of product or service rendered.

(3) Accidents, damages, errors, spoilage, wastages, etc.

(4) The time spent in appraising the employee.

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37 Thank you
Wish getting success